Correlation Between Jahwa Electron and LG Energy

Can any of the company-specific risk be diversified away by investing in both Jahwa Electron and LG Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Jahwa Electron and LG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jahwa Electron and LG Energy Solution, you can compare the effects of market volatilities on Jahwa Electron and LG Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jahwa Electron with a short position of LG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jahwa Electron and LG Energy.

Diversification Opportunities for Jahwa Electron and LG Energy

-0.41

Correlation Coefficient

Jahwa Electron  LG Energy

Very good diversification

The 3 months correlation between Jahwa and 373220 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Jahwa Electron and LG Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Energy Solution and Jahwa Electron is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jahwa Electron are associated (or correlated) with LG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Energy Solution has no effect on the direction of Jahwa Electron i.e., Jahwa Electron and LG Energy go up and down completely randomly.

Pair Corralation between Jahwa Electron and LG Energy

Assuming the 90 days trading horizon Jahwa Electron is expected to under-perform the LG Energy. In addition to that, Jahwa Electron is 1.57 times more volatile than LG Energy Solution. It trades about -0.11 of its total potential returns per unit of risk. LG Energy Solution is currently generating about 0.13 per unit of volatility. If you would invest  35,200,000  in LG Energy Solution on November 28, 2024 and sell it today you would earn a total of  2,200,000  from holding LG Energy Solution or generate 6.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Jahwa Electron  vs.  LG Energy Solution

Jahwa Electron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jahwa Electron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jahwa Electron sustained solid returns over the last few months and may actually be approaching a breakup point.

LG Energy Solution

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Energy Solution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LG Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jahwa Electron and LG Energy

The main advantage of trading using opposite Jahwa Electron and LG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jahwa Electron position performs unexpectedly, LG Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LG Energy will offset losses from the drop in LG Energy's long position.

The idea behind Jahwa Electron and LG Energy Solution pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.